Direct-to-Consumer Insurance Model Impact on Insurers

Not two decades ago, all auto insurance policies were processed by insurance brokers. However, growing digitalization and consumers’ subsequent demands for direct access to the products and services they seek have forced insurance companies to step out of their comfort zones and become more creative with how they acquire customers from various segments of the population while remaining profitable.

Then, the pandemic hit. COVID-19 disrupted just about every aspect of modern human life. It also served as the perfect catalyst for the “direct-to-consumer” (DTC or D2C) insurance model. Whilst under lockdown, the only way brands (of all kinds, in all industries) could keep their businesses afloat was by taking their activities online. Establishing a broader digital presence became mission-critical and it allowed insurance companies to directly connect with their target audiences, anytime and from anywhere, so they could close more deals, intermediary-free.

What is the Direct-to-Consumer Insurance Model, really?

The Direct-to-Consumer Insurance Model is a vertical business model that was purpose-built to enable companies to sell their products or services directly to their end customers, while bypassing any middlemen, such as wholesalers, retailers, or, in the case of insurance, insurance brokers or digital marketplaces.

To facilitate this goal, car insurance companies are creating dedicated digital points of sale, such as their own websites and applications. Using advanced data collection, CRM, BI and analytics tools, DTC businesses are able to better learn about their target audiences’ needs, pain points, preferences, and tailor their operations and sales efforts accordingly, to close more deals.

Insurers love DTC sales

In a country as expansive as the US, selling through the direct-to-consumer insurance model provides exceptional benefits:

• Enhanced data intelligence
  As mentioned above, the digital nature of selling DTC enables insurance companies to learn about potential and existing customers’ insurance needs, purchasing behaviors, and other preferences. This highly valuable, refined data pool allows insurance companies to create, monitor, and optimize key performance indicators in order to more precisely market and sell insurance policies to those most likely to buy.
• Superior market segmentation
  The insights gleaned from analyzed customer data can – and should – allow insurance companies to segment the population according to geographic location, purchasing potential/intent, type of insurance needed/desired, and other relevant metrics. Doing so opens the door to a more customized sales experience per segment, as well as to more cross and upsell opportunities, to meet evolving needs, such as ahead of a big life event (marriage, welcoming a new child into the family, a move to a new climate, etc.).
• Direct communication
  Not only does direct communication eliminate the middlemen and their cut of the deal, thereby increasing insurance companies’ profitability, but it also allows for greater education of potential or existing customers, as to which insurance policies within a given company could be their best fit. Many insurance companies that make the transition to DTC now employ personalized flows or chatbots to help achieve this goal, streamlining the customer journey even further.
• Improved customer experience
  Finally, the direct-to-consumer insurance model allows insurers and customers to undergo a digital underwriting process, through which personal data and potential risks can be quickly and seamlessly assessed. This enables quotes to be provided faster and with greater transparency for all. It also allows claims to be filed swiftly and hassle-free, 100% online, for simpler resolution.

Bottom line: how the direct-to-consumer insurance model is affecting insurers

While the initial efforts of adopting a direct-to-consumer insurance model can be high, and there is a learning curve to managing your own marketing, sales, and customer service end-to-end, DTC has become the added value that improves the customer journey and fosters increased loyalty in insurance companies, for the long haul. As such, in a post-pandemic world, it’s safe to say that DTC is here to stay, and insurance companies that have yet to adopt this digital trend must do so – with haste – if they wish to remain both competitive and profitable in the short and long term.

Kissterra’s Marketing OS helps insurance providers initiate and grow their DTC efforts, while ensuring profitability. Talk to us to learn how.